Analyzing Data: Visualization and Business Intelligence
By Marc D. Mintz, CPA, Marc Mintz & Associates, LLC –
February 28, 2017
A picture is worth 1,000 words — cliché but so true. How do we, as financial professionals, turn mountains of raw data into easily absorbed intelligence: Information that can be used by key stakeholders to make actionable decisions to achieve the goals within an organization or business?
Opportunities abound for CPAs to leverage their expertise in traditional, after-the-fact historical reporting in order to transition to a world where contemporaneous monitoring of both financial and non-financial activities paves the way for discerning insights which can foster calculated business decisions in near real-time. To best assure a positive outcome when attempting to establish a decision support system, develop a detailed plan which builds in procedures for both monitoring and refining your initial assumptions. Your plan should include the following steps:
- Establish high-level strategic goals.
- Develop tactical measures to support the selected strategic goals.
- Identify key metrics to align with your goals and tactics.
- Research and select the appropriate tools to provide actionable advice.
- Draft a written implementation plan.
- Monitor and challenge the system’s results.
- Streamline, refine and simplify the established metrics and visual cues.
Establish High-Level Strategic Goals
A goal without a plan is nothing more than a wish. Synthesize into short and simple sentences the major objectives you are attempting to achieve. For example, “We want to increase our gross margins, reduce our incidents of merchandise returns, expand our sales into new geographic territories and decrease our dependence on key customers.” If this is your first attempt at implementing a decision support system, keep the list of goals very short, narrowly focused and consistent with one another. It will be much easier to master the entire process by building upon small successes. Too often projects fail when people become overwhelmed by unrealistic initial goals.
Develop Tactical Measures
Once you define the high-level strategic goals, establish the detailed activities that will provide the resources and direction you need to accomplish those goals. For example, if you are attempting to expand the types of products being offered to existing customers, it will be necessary to decide exactly what those items are, how they will be priced and who will be responsible for both procurement and sales. If your goal is to increase gross margins, define what line items should be included in cost of goods sold and simultaneously establish a work flow that properly records all customer sales and vendor invoices in a consistent manor. Measuring key metrics will be of scant consequence if the underlying assumptions of activities are not being properly monitored or recorded.
Identify Key Performance Indicators (KPIs)
In order to manage, you must be able to measure. Selecting and developing the appropriate KPIs is the art in the science of data analytics. As CPAs, we focus on historical indicators, which by definition are lagging in nature. Try instead to identify predictive indicators when developing decision support systems. After all, wouldn’t you rather purchase stocks for your portfolio based on indicators which predict their future price rather than merely reviewing where the price has been?
Be aware that many important indicators must be gleaned from outside of traditional accounting and transaction processing systems. For a good resource for identifying KPIs, create a free account at KPI Library (kpilibrary.com). Here you will find hundreds of KPIs categorized by industry, process, function and framework. Also be sure to benchmark KPIs to industry-available resources such as Bizstats, Sageworks and the IRS.
Identify and Select Reporting Tools
As a result of the enormous amount of data involved, in conjunction with the necessity for accuracy and timeliness, it is not feasible to establish a decision support system that does not fully integrate with the original source of data accumulation. Identifying which programs integrate seamlessly with your current system is the first step in selecting the appropriate reporting tools, dashboards and dynamic visual indicators which form the backbone of today’s decision support systems.
If you are using Microsoft accounting programs such as Dynamics AX, NAV or GP, look at Jet Reports (jetreports.com). It offers a complete line of dashboards, analytics and reporting solutions consistent across all of these programs. If you are using Sage 50, 100, 300 or X3, then Sage Intelligence Reporting (sageintelligence.com) is the tool of choice. It integrates these programs into highly customizable decision support systems which can retrieve data from sources beyond traditional accounting systems. If you are working with the Intuit line of accounting products, add-on programs like Qlik (qlik.com), Fathom (fathomhq.com), Finagraph (finagraph.com) and Corelytics (corelytics.com) may be your weapon of choice. Most of these programs use the ubiquitous Excel spreadsheet as an interface to provide ease of use and flexibility. It is also worth noting that Microsoft itself has developed Power BI (powerbi.microsoft.com), which is quickly becoming a staple for transforming data into analytical business systems that provide rich visuals for management and decision making.
Implement, Monitor, Refine and Simplify
In the end, it all comes down to people — and their judgement — when evaluating the true success and recurring benefits of any decision support system. Not even the best tool will provide value if the appropriate personnel are not consulted with and empowered to further the strategic goals of an organization. Continually review actions and decisions. Reconsider and question assumptions. When necessary, adjust plans to changing business conditions, competitor’s responses and the availability of human and capital resources.
As the world transitions to an Internet-based economy where resources are allocated in near real-time, long gone will be the days where decision making is supported by gut-feel managers relying on stale historical data. Data analytics represents a brave new world for CPAs to retain their role as trusted advisors bringing value to their clients, employers and society in general.
Sample KPI Dashboards
Click each image to see a larger version.
Marc D. Mintz
Marc D. Mintz, CPA, CITP, CGMA, is the managing member of Marc Mintz & Associates, LLC, a technology consulting firm that assists businesses with strategic planning and the selection and implementation of information technology systems. He is a past president of the Passaic County Chapter. He can be reached at 973-808-9040.
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This article appeared in the March/April 2017 issue of New Jersey CPA magazine. Read the full issue.